The Women of Enron : The Best Revenge

Regrets? Hardly. For Sherron Watkins, life since Enron imploded has gotten a whole lot better.

Douglas “Sandy” Warner, retired chairman of J.P. Morgan Chase & Co., is watching Sherron Watkins. John Thornton, president and CEO of Goldman Sachs, is watching Sherron Watkins. The founding deans of Yale Law School (or their portraits, anyway, gazing regally from the walls of the hallowed university’s classroom) are watching Sherron Watkins. Even Sherron Watkins is watching Sherron Watkins.


We’re at the Yale CEO Leadership Summit, an off-the-record, behind-the-velvet-rope annual bull session of corporate big shots sponsored by Yale School of Management associate dean Jeffrey Sonnenfeld, and everyone is riveted to the video screen in the front of the room. Playing is a scene from the made-for-TV cheesefest “The Crooked E,” in which Watkins confronts her boss, Ken Lay, about the financial shenanigans at Enron. Leaning for-ward deferentially, her voice quivering just a bit, the fake Watkins says her piece, is thanked by Lay and then abruptly ushered out of the room. She’s a nobody. But when the lights come up in the room less than two years after that critical meeting, every head swivels to catch a better look at the brassy Texas broad in the baby-blue suit. The real Sherron Watkins charms them with a big smile. Even in this room of corporate titans, she is definitely somebody.

Accolades, invitations, introductions — it’s pretty much the way life has been for Watkins, 44, since that day in January 2002 when congressional investigators leaked the memos that she had written to Lay the previous August. She warned that Enron — the seventh-largest company in the country and one of the top stock performers in the bull market — was about to “implode in a wave of accounting scandals.” Watkins hoped that Lay would accept her analysis and put things right before the world figured out that Enron’s profits were as illusory as a Siegfried & Roy spectacular. We all know what happened next.

For many former Enroners, the past two years have been a study in downward mobility, as jobs, pensions, and reputations have evaporated. But for Watkins, since that terrifying morning when she got ready to go to work and found a phalanx of klieg lights outside her front door, life has taken a distinctly positive twist. She has cowritten a book, Power Failure (Doubleday, 2003), about her experiences, sharing a $425,000 advance with a co-author. She’s hit the lecture circuit, making as much as $35,000 a pop to tell adoring audiences her story — although, says her husband Rick, the money still doesn’t come close to those wonderful bonuses doled out during Enron’s heyday. In 2002, Time magazine named her Person of the Year, along with the women who sussed out funny business at WorldCom and the FBI. Diane Sawyer, Matt Lauer, and the 60 Minutes staff sent her flowers and cards (she finally picked Lauer to tell her story on national television). At the Yale summit, one attendee made a point of telling her that she was a folk hero. Even Warren Buffett has invited her to stop by for a chat the next time she’s in Omaha.

That’s pretty glamorous stuff for a onetime accountant from Tomball, Texas. “Isn’t it kinda funny,” she says, stopping every so often in the middle of the Yale campus to scuff up her brand new — and slippery — heels, “that Ken Lay is sitting at home and people are coming up to me and saying, ‘We gotta get you to Davos next year’?”

Although Watkins seems to have adjusted to celebrity rather effortlessly, she’s still the smart, funny, outspoken, and, er, profane woman we saw testifying before a congressional panel, keeping her cool while former Enron CEO Jeffrey Skilling tried his best to bore holes into her with his eyes. “Oh shit!” she yells out in the middle of a quiet restaurant after an errant chunk of Vietnamese chicken lands perilously close to her blue suit with brown polka-dot trim. “Pardon my French.” An oily chicken stain, after all, might distract some of these execs from focusing on Watkins’s new business idea, and that would be a major opportunity missed. “I’m not going to be in demand on the lecture circuit all the time,” she says. “[This is] a public platform that hopefully I can use for good.”

Like a surprising number of other veterans of the corporate scandal wars, Watkins thinks her future is in the field of governance. Once all of the speaking engagements and high-level meetings dry up, she plans to open a not-for-profit (how un-Enron — or maybe how very like Enron) consulting firm that will help companies do annual “board checkups,” spotting problems before it’s too late. “Corporate governance on paper means jack all,” she says. “Procedures mean jack all. It’s more about the relationship between the board and upper management.”


The firm, which doesn’t have a name yet, would boast the top names in governance on an advisory board and hire semi-retired senior executives, accountants, lawyers, SEC types, and others to do annual board assessments — in the same way that a doctor bangs your knees and feels your glands in an annual checkup. Consultants would spend weeks meeting with each board member and with key executives to assess whether there is honest and open communications and information flow. “[Enron] was a totally dysfunctional board,” says Watkins, “but on paper it looked good. This is routine maintenance to make sure that you never turn into an Enron or a WorldCom. “

It is ironic that Watkins hopes to make a name for herself in the boardroom, when she didn’t choose to inform Enron’s board of the company’s problems but instead went to Lay. Even today, she defends her decision, saying that she believed Lay would do the right thing. Yet her one regret is that she didn’t go to the audit committee later, once she realized Lay’s idea of checking her allegations was employing Enron’s in-house law firm.

Watkins knows that some people snipe that she wasn’t ever a true “whistle-blower,” and surprisingly, she’s the first to agree. “If someone can come up with a better term, fine,” she says. “It’s not what I’d call myself. When a company cooks the books, its best bet is to come clean itself. Rat-finking outside isn’t going to correct the problem.” Real independent board members with unfettered access to management, she thinks, will.

Watkins is also considering joining the audit committee of a couple of companies: one a large not-for-profit, the other a public company. And she’s talking to two insurance companies about a job in which she’d visit its top corporate clients and lecture them on the responsibilities of board service (and, of course, the benefits of directors’ and officers’ liability insurance). After all, who better to warn about the perils of directorship than the person whose analysis later made the Enron board look like a bunch of clueless ingenues?

For now, the next incarnation of Watkins Inc. is still a couple of lines on a whiteboard. She’s simply too busy meeting and greeting the movers and shakers of the business world. In the month of May alone, she spoke in Houston; Dallas; Overland Park, Kansas; Chicago; Minneapolis; Lodi, California; Las Vegas; Austin; and then Houston again. It was there, in early June, that she went to Fleming Park with her 4-year-old daughter and noticed, near the refreshment stand, none other than Andrew Fastow, Enron’s former CFO and the alleged creator of the self-dealing partnerships that Watkins warned Lay about, with his son.

Some might have seen his indictment on 109 criminal charges as punishment enough. Not Watkins. “I was going to make him have to say hi or do something,” says Watkins, exuding the air of someone who finally took on the class bully. “So I walked up and just said, ‘Hi, Andy, this is my daughter, Marion. I don’t think you’ve met her.’ He looked like a stricken person, like he needed to get out of there soon.” Fastow fled the scene, she says. And once again, Watkins proved that you just don’t mess with this particular brand of Texas.